The Handshake Agreement

Often when folks think about the farming community and the way in which business is conducted in rural areas, they think of the classic handshake agreement.  In this process, two people chat about a business arrangement, agree to work together, and seal the deal with a firm handshake.  Business then proceeds as arranged and everything is peachy-keen.  Nothing ever goes wrong because rural folks are simple and honest and it all just works (I write this with deep sarcasm, of course).  If you were to take this business model to the city, you would quickly be laughed out of the office and would never make a deal, and if you did, you might find that the other party had taken advantage of your trust.

I think it is time to remove the handshake agreement from business because it simply doesn't work.  Of course, there will always be people who take advantage of another person's trust.  However, my dislike of the handshake agreement doesn't stem from distrust of my neighbours and potential business partners.  Rather, I am finding that handshake agreements simply leave too much unsaid.  Let me explain.

Let's say that I rent a 40-acre field from my neighbour (we'll call him Bob).  We agree that I will pay $55/acre to have the use of the field for a year.  We agree to these terms and shake hands to seal the deal.  Now that I have the use of that land, am I allowed to do anything I want with it?  There is nothing telling me what I can or cannot do.  Suppose this field is really nice and clean, with very few weeds in it.  I don't want to spend much money, so I buy low-quality seed from another neighbour and plant it.  The seed is full of of weed seeds and these weeds come up.  Still not wanting to spend money, I refuse to employ any method of weed control and the problem spreads.  Now Bob's field is full of weeds.  The next person to rent that field might demand a lower rental price since the land is not clean and they will have to spend extra money on weed control.  Not only that, but if there happens to be noxious or prohibited noxious weeds in there, Bob will have to pay the local weed inspector to control or destroy them.  Bob loses money because I was irresponsible with his land, but he has no written agreement to point to and say, "Valerie, you violated our agreement and my trust.  You are responsible for cleaning up this mess."  Instead he takes the financial hit and thinks twice about renting his land to me in the future.  As the renter, I can technically do whatever I want with the land and Bob will take the loss if I am irresponsible because there was no written agreement in place to guide my activities.

What about the owner's land use, though?  Bob owns the land.  Is he entitled to use it during the time I have it rented?  There is no agreement saying he can't.  Suppose I rent the land, plant my crop and carry on in a responsible fashion.  Bob accepts the rent cheque and carries on with his business, paying no attention to the field until one weekend when his grandkids come for a visit.  The grandkids enjoy taking their ATVs and dirt bikes for a ride.  The most convenient space for the kids to do this is on the 40 acres behind the house, the 40 acres I have rented.  Bob owns the land, though, so he allows his grandkids to ride all over the field, damaging my crop.  Whether that crop is lentils, wheat, oats, hay, or tame pasture, it doesn't matter.  My crop, which I own, has been damaged.  I will have to take the loss, however, because there is no written agreement saying that Bob and his relatives can't use the land while I have it rented.  I have nothing to point to and say, "Bob, you violated our agreement.  You need to pay for this damage."

In both cases, neither I nor Bob violated our agreement.  I paid Bob the agreed upon price and he let me use the land for the agreed upon period of time.  However, in each situation, one of us took a serious hit.  That is exactly what is wrong with the handshake agreement.  Now, you may say to me, "Valerie, that wouldn't actually happen."  And I will answer, "I have listened to a landlord complain to my dad about another renter who would not deal with his weeds properly.  I have also, in the past few weeks, seen the relatives of two different landlords ride ATVs and other off-road vehicles all over my dad's hay crop (and don't tell me it's just hay - it's a crop and it was damaged)."  These are real-life situations that could easily be avoided with a written agreement.

It's okay to trust your neighbours, but why not protect yourself and your business partners with a proper written contract?